Chapter 12: Designing Strategic Control Systems

1. 12-1 Chapter 12: Designing Strategic Control Systems Text by Charles W. L. Hill Gareth R. Jones Multimedia Slides by Milton M. Pressley Univ. of New Orleans

2. 12-2 Preview • What Is Strategic Control? • Strategic Control Systems • Organizational Culture • Strategic Reward Systems

3. 12-3 What Is Strategic Control? • Strategic Control Defined • Selection of Organizational Strategy and Structure • Creation of Control Systems to Monitor and Evaluate

4. 12-4 What Is Strategic Control? The Importance of Strategic Control • Control and Efficiency • Control and Quality • Control and Innovation • Control and Responsiveness to Customers

5. 12-5 Balanced Scorecard Approach to Strategic Control • The Balanced Scorecard Model

6. 12-6 Establish Company Mission and Goals Develop a Strategy and Structure Figure 12.1: A Balanced Scorecard Approach

7. 12-7 Establish Company Mission and Goals Develop a Strategy and Structure Create Strategic Control Systems that Measure: Efficiency Quality Innovation Customer Response Figure 12.1: A Balanced Scorecard Approach

8. 12-8 Establish Company Mission and Goals Develop a Strategy and Structure • Create Strategic Control • Systems that Measure: • Efficiency • Quality • Innovation • Customer Response Measure Financial Performance Figure 12.1: A Balanced Scorecard Approach

9. 12-9 Establish Company Mission and Goals Develop a Strategy and Structure • Create Strategic Control • Systems that Measure: • Efficiency • Quality • Innovation • Customer Response Measure Financial Performance Take Corrective Action to Solve Problems or Exploit New Opportunities Figure 12.1: A Balanced Scorecard Approach

10. 12-10 Strategic Control Systems • Strategic Control Systems Defined • Steps in Designing Control Systems

11. 12-11 Figure 12.2: Steps in Designing an Effective Control System Establish Standards and Targets

12. 12-12 Establish Standards and Targets Create Measuring andMonitoring Systems Figure 12.2: Steps in Designing an Effective Control System

13. 12-13 Establish Standards and Targets Create Measuring andMonitoring Systems Compare Actual Performance Against the Established Targets Figure 12.2: Steps in Designing an Effective Control System

14. 12-14 Establish Standards and Targets Create Measuring andMonitoring Systems Compare Actual Performance Against the Established Targets Evaluate Result and Take Action If Necessary Figure 12.2: Steps in Designing an Effective Control System

15. 12-15 Strategic Control Systems(Continued) Figure 12.3: Levels of Organizational Control Corporate-Level Managers (Set Controls Which Provide Context For) Divisional-Level Managers (Set Controls Which Provide Context For) Functional-Level Managers (Set Controls Which Provide Context For) First Level Managers

16. 12-16 Financial Output Behavior Organization- Control Control Control al Culture Stock Price Divisional Budgets Values Goals ROI Functional Standardiza- Norms Goals tion Transfer Individual Rules and Socialization Pricing Goals Procedures Strategic Control Systems(Continued) Table 12.1: Types of Control Systems

17. 12-17 Strategic Control Systems(Continued) • Financial Controls • Stock Market Price • Return on Investment (ROI) • Market Share • Cash Flow

18. 12-18 Strategic Control Systems(Continued) • Output Controls • Divisional Goals • Functional and Individual Goals

19. 12-19 Strategic Control Systems(Continued) Management by Objectives (MBO) • Establish Specific Goals at Each Organizational Level

20. 12-20 Strategic Control Systems(Continued) Management by Objectives (MBO) • Goal Setting is Participatory

21. 12-21 Strategic Control Systems(Continued) Management by Objectives (MBO) • Periodic Review of Progress

22. 12-22 Behavior Control • Operating Budgets • Standardization • Standardization of Inputs • Standardization of Conversion Activities • Standardization of Outputs

23. 12-23 Organizational Culture • Organizational Culture Defined • Organizational Values • Organizational Norms • Socialization

24. 12-24 Social- ization Tactics Norms and Values Organi- zational Rewards Rites and Cere- monies Signs, Symbols, and Stories Organizational Culture Figure 12.4: Ways of Transmitting Culture

25. 12-25 Organizational Culture (Continued) • The Influence of the Founder • Organizational Structure Culture and Strategic Leadership

26. 12-26 Organizational Culture (Continued) Adaptive and Inert Cultures • Adaptive Cultures

27. 12-27 Organizational Culture (Continued) Adaptive and Inert Cultures • Adaptive Cultures • Inert Cultures

28. 12-28 Organizational Culture (Continued) • Helps Determine the Company’s Strategic Direction • Establishes the Values and Norms That Lower-Level Managers Will Follow Composition of the Top Management Team

29. 12-29 Organizational Culture (Continued) • Bias for Action • Nature of the Organization’s Mission • How to Operate the Organization Traits of Strong and Adaptive Corporate Cultures

30. 12-30 Strategic Reward Systems Individual Reward Systems • Piecework Plans • Commission Systems • Bonus Plans • Promotion

31. 12-31 Strategic Reward Systems (Continued) Group and Organizational Reward Systems • Group-Based Bonus Systems • Profit-Sharing Systems • Employee Stock Option Systems • Organization Bonus Systems

32. WHAT IS STRATEGIC CONTROL? STRATEGIC CONTROL SYSTEMS ORGANIZATIONAL CULTURE STRATEGIC REWARD SYSTEMS 12-32 Chapter Summary